Economics Today The Macro View Ch. 33 Exchange Rates
and the Balance of Payments
1. Balance of Trade ✔️: The difference between exports and imports of physical goods.
2. Balance of Payments ✔️: A system of accounts that measures transactions of goods, services,
income, and financial assets between domestic households, businesses, governments, and residents of
the rest of the world during a specific time period.
3. Accounting Identities ✔️: Values that are equivalent by definition.
4. Disequilibrium ✔️: If family expenditures exceed family income and this situation is financed by
borrowing, the household may be considered to be in disequilibrium because such a situation cannot
continue indefinitely.
5. Current Account ✔️: A category of balance of payments transactions that measures the exchange of
merchandise, the exchange of services, and unilateral transfers.
6. Current Account Surplus ✔️: If the sum of net exports of goods and services plus net unilateral
transfers plus net investment income exceeds zero.
,7. Current Account Deficit ✔️: If the sum of net exports of goods and services plus net unilateral
transfers plus net investment income is negative.
8. Capital Account ✔️: A category of balance of payments transactions that measures flow of financial
assets.
9. Official Reserve Assets ✔️: Includes foreign currencies, gold, Special Drawing Rights (SDRs), reserve
position in the IMF, and financial assets held by an official agency.
10. Special Drawing Rights (SDRs) ✔️: Reserve assets created by the IMF for countries to use in settling
international payment obligations.
11. International Monetary Fund (IMF) ✔️: An agency founded to administer an international foreign
exchange system and to lend to member countries that had balance of payments problems.
12. Foreign Exchange Market ✔️: A market in which households, firms, and governments buy and sell
national currencies.
13. Exchange Rate ✔️: The price of one nation's currency in terms of the currency of another country.
, 14. Flexible Exchange Rates ✔️: Exchange rates that are allowed to fluctuate in the open market in
response to changes in supply and demand.
15. Appreciation ✔️: An increase in the exchange value of one nation's currency in terms of another
nation.
16. Depreciation ✔️: A decrease in the exchange value of one nation's currency in terms of another
nation.
17. Slope of Demand Curve ✔️: Downward sloping.
18. Market Determinants of Exchange Rates ✔️: Includes changes in real interest rates, changes in
consumer preferences, and perceptions of economic stability.
19. Bretton Woods and the IMF ✔️: The creation of the IMF in 1944 by representatives of the world's
capitalist countries.
20. Foreign Exchange Risk ✔️: The possibility that changes in the value of a nation's currency will result
in variations in the market value of assets.
and the Balance of Payments
1. Balance of Trade ✔️: The difference between exports and imports of physical goods.
2. Balance of Payments ✔️: A system of accounts that measures transactions of goods, services,
income, and financial assets between domestic households, businesses, governments, and residents of
the rest of the world during a specific time period.
3. Accounting Identities ✔️: Values that are equivalent by definition.
4. Disequilibrium ✔️: If family expenditures exceed family income and this situation is financed by
borrowing, the household may be considered to be in disequilibrium because such a situation cannot
continue indefinitely.
5. Current Account ✔️: A category of balance of payments transactions that measures the exchange of
merchandise, the exchange of services, and unilateral transfers.
6. Current Account Surplus ✔️: If the sum of net exports of goods and services plus net unilateral
transfers plus net investment income exceeds zero.
,7. Current Account Deficit ✔️: If the sum of net exports of goods and services plus net unilateral
transfers plus net investment income is negative.
8. Capital Account ✔️: A category of balance of payments transactions that measures flow of financial
assets.
9. Official Reserve Assets ✔️: Includes foreign currencies, gold, Special Drawing Rights (SDRs), reserve
position in the IMF, and financial assets held by an official agency.
10. Special Drawing Rights (SDRs) ✔️: Reserve assets created by the IMF for countries to use in settling
international payment obligations.
11. International Monetary Fund (IMF) ✔️: An agency founded to administer an international foreign
exchange system and to lend to member countries that had balance of payments problems.
12. Foreign Exchange Market ✔️: A market in which households, firms, and governments buy and sell
national currencies.
13. Exchange Rate ✔️: The price of one nation's currency in terms of the currency of another country.
, 14. Flexible Exchange Rates ✔️: Exchange rates that are allowed to fluctuate in the open market in
response to changes in supply and demand.
15. Appreciation ✔️: An increase in the exchange value of one nation's currency in terms of another
nation.
16. Depreciation ✔️: A decrease in the exchange value of one nation's currency in terms of another
nation.
17. Slope of Demand Curve ✔️: Downward sloping.
18. Market Determinants of Exchange Rates ✔️: Includes changes in real interest rates, changes in
consumer preferences, and perceptions of economic stability.
19. Bretton Woods and the IMF ✔️: The creation of the IMF in 1944 by representatives of the world's
capitalist countries.
20. Foreign Exchange Risk ✔️: The possibility that changes in the value of a nation's currency will result
in variations in the market value of assets.
